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You've probably heard a lot about biofuels. But what are they, exactly? This handy guide breaks down the various types of biofuel and its cousin, ethanol, and explains why a car that runs on biofuel doesn't necessarily affect your car insurance.

what is biofuel?

Biofuels are simply fuel derived from plants, which makes them renewable. If you're considering alternative fuels for your car, scope out the differences between them, because each is used and regulated in its own way.

Biodiesel

While not as readily available as standard petroleum diesel, biodiesel is one of the most eco-friendly alternatives for cars with diesel engines.

Clean-burning, nontoxic, and biodegradable, biodiesel is generally made by combining vegetable oils, yellow grease, or tallow with alcohol through a refining process called transesterification. This process separates impurities, such as glycerin, creating a cleaner-burning fuel. In fact, pure biodiesel has been found to emit up to 50 percent less carbon monoxide (of greenhouse gas notoriety) than regular diesel.

Biodiesel is often used as an additive to standard petroleum diesel, and in some engines it can be used on its own.

Vegetable oil

Though it would be cool — and delicious — to run our cars on French fry grease, the Environmental Protection Agency hasn't approved vegetable oil as a viable alternative fuel source.

Why? Because vegetable oil hasn't gone through transesterification, it still contains chemicals like glycerin, which makes it less clean-burning than its regulated cousin, biodiesel.

Plus, unprocessed vegetable oil or recycled greases can cause long-term engine deposits, which could lead to maintenance problems and shortened engine life over time. Which isn't good.

ethanol for non-diesel engines

Ethanol is an alternative for folks who want to go green without driving diesel-engine cars. It's made from entirely renewable crops, and its production is similar to that of beer and wine. Various plant materials, like corn, trees, or grasses, are converted into sugar, fermented, then refined into alcohol-rich fuel, which (don't get any ideas) clocks in at 200 proof and is unfit for human consumption.

In defense of ethanol, it's cleaner burning and more ecologically sustainable than pure gasoline. But on the flip side, ethanol produces less energy than gasoline.

Almost all gas sold in the U.S. contains ethanol in one of these ratios:

E10: ethanol and gasoline

E10, a blend of 10 percent ethanol and 90 percent gasoline, is available in every state. More than 95 percent of gas sold in the U.S. today contains about 10 percent ethanol, which boosts octane and improves air quality. Since E10 is everywhere, it isn't considered an alternative fuel.

E85 and flex-fuel: ethanol and gasoline

E85, the richer ethanol blend, is a misnomer: it can actually contain anywhere from 51 percent to 83 percent ethanol, depending on the location and season. Unlike E10, which can be used in any car, E85 can only be used in flex-fuel vehicles (FFVs).

FFVs are designed to run on gasoline or E85. They're becoming increasingly popular, with dozens of models on the market. Manufacturers produce ethanol-friendly versions of some popular models, including the Ford Focus, the Dodge Charger, and the Mercedes-Benz C350.

do biofuel vehicles qualify for tax credits?

According to the U.S. Department of Energy, some alternative fuel vehicles (AFVs) can qualify you for a tax credit of up to 50 percent off the vehicle's incremental purchase cost. This credit could be available on tax years up to 2020.

If this incremental cost can't be determined or the AFV is sold, a credit up to $1,500 could also be available, as long as no credit had already been used on the vehicle.

Whether you think you qualify for tax incentives or not, if you're looking to buy an alternative fuel vehicle, it doesn't hurt to ask.

does it cost more to insure biofuel cars?

Biofuel cars are powered differently than their gas counterparts, but insuring them is the same. Cars running on biofuels aren't more susceptible to accidents, so things like your ZIP Code and your driving history will impact your insurance rate while the type of fuel your car uses.

Case in point: we crunched some numbers on a few hypothetical insurance policies. Our findings? Under the same circumstances, a biofuel version of a car generally doesn't cost more to insure than the standard, gas-engine version — and in some cases it's actually cheaper. For instance, the 2012 Ford Fusion SEL (an FFV, if you're curious) is almost 4 percent cheaper to insure than the similarly priced, gas-only Fusion Sport, and insurance for the clean diesel 2012 Volkswagen Jetta TDI is around 7.5 percent cheaper than the Jetta SEL.

The moral? The price of car insurance doesn't depend on your car's fuel preference, just on how you use it.